Boston, MA 05/19/2014 (wallstreetpr) – The $191 billion telecom giant AT&T Inc. (NYSE:T) announced an acquisition deal with satellite television company DIRECTV (NASDAQ:DTV). Having had their boards to agree to the deal, the companies look forward to regulatory approval towards the formation of a combined company that could change the way television content is distributed and consumed.
Although the companies agreed to a $48.5 billion tie-up deal that includes cash and stock transaction, the deal could be worth much more considering debt and other aspects of the transaction. Therefore, the overall value of the deal could be worth more than $67 billion given that AT&T Inc will assume the debt of Direct TV.
The satellite television provider had free cash flow of $2.6 billion at the end of fiscal 2013. That is being seen as one motivation for AT&T Inc. (NYSE:T) to pursue a deal with the company.
Expanding TV market share
The acquisition of Direct TV will significantly expand the market share of AT&T Inc in the television business. Through its U-verse television service, the company has subscribers numbering just about 5 million. However, Direct TV boasts more than 20 million subscribers and the number is growing fast in the Latin America market.
AT&T Inc. (NYSE:T) CEO, Randall Stephenson, told investors Sunday the deal will grant his company a unique opportunity to shape the video entertainment industry by creating an entity that can deliver television services across a variety of platforms that include airplanes, mobile devices, laptop and cars.
Media deals
If the regulators approve the proposed tie-up of AT&T Inc and Direct TV, the combined company is likely to be the No. 2 television provider in the U.S. in terms of subscribers. The proposed merger of Comcast Corporation (NASDAQ:CMCSA) and Time Warner Cable Inc (NYSE:TWC) is likely to produce the U.S. No. 1 television provider by market share. The two media companies are also awaiting regulatory decision on their proposed merger.
The U.S. television and telecom industry is awash with deals as players seek to consolidate operations in efforts to reduce costs and maximize value for the investors. That is why telecom providers Sprint, which is owned by SoftBank, seeks to join forces with T-Mobile US Inc (NYSE:TMUS).
